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Your Car Insurance & Coronavirus: What You Need to Know

by Agnieszka Fratczak,  May 14 2020

Key Points

  • With fewer cars on the road and many drivers staying home altogether, it can be hard to justify paying your usual auto insurance premiums.
  • Many Americans have been laid off or furloughed and may be struggling to pay monthly bills, including auto insurance premiums required to keep coverage active.
  • Canceling an auto insurance policy may not be a good idea, as it could impact things like driver’s license eligibility and even affect insurability later on. If you really need to cut costs, reducing your coverage might be a better solution. 
  • Many insurance companies are offering rebates, discounts, and assistance with premiums to keep customers happy — and in good standing — at this time. 

The impacts of the coronavirus pandemic have been unprecedented and far-reaching. With many schools and businesses shut down and reopening dates for many states still unknown, Americans are finding themselves spending a lot more time at home and a lot less time behind the wheel for their daily commute.

This sudden shift in driving habits, combined with the financial impacts of COVID-19, have many households reevaluating their monthly spending when it comes to things like auto insurance premiums. But is now really a good time to make changes to your coverage?

How the Coronavirus Pandemic is Impacting How We Drive

Life today looks very different from just a few short months ago. Toilet paper shortages and curbside pickups aside, the coronavirus pandemic has impacted our everyday lives.

With businesses and schools closed or operating remotely, essential workers are pretty much the only ones with a daily commute right now. Even food and grocery delivery has become the norm, leaving us with few reasons to actually leave the house.

This means that most of us are driving a mere fraction of the miles that we used to drive each week. And less time on the road means we pose a smaller risk to our insurance companies.

Even if we are racking up the same number of miles behind the wheel, however, we are still less of a risk for insurance purposes than we were before the pandemic began. That’s because, with fewer drivers on the road, there is less traffic and fewer auto accidents. Driving then, by default, is suddenly safer. 

Canceling Your Auto Policy While You’re Stuck at Home

You aren’t going to work, you aren’t taking the kids to school, and you get your groceries delivered. Do you even need to be paying for auto insurance right now, if you aren’t even driving your vehicle?

While it can be tempting to cancel your auto policy until life returns to normal, this might not be the best solution. Sure, it could potentially save you a few hundred dollars now, but it could also have some significant impacts later on.

Why This is a Bad Idea

In many states, your vehicle’s registration is tied to an active auto insurance policy. Remove your coverage — even by choice and even if only temporarily — and you could face consequences with the state. Plus, you may find yourself in a bind if you absolutely need to drive somewhere without warning, but no longer have valid coverage.

In some cases, you may be required to turn in your vehicle’s plates and cancel your registration if you don’t have an active auto insurance policy. And once you reinstate your auto insurance coverage, you might even need to re-register your vehicle.

Additionally, having a period of time in your recent history when you didn’t have auto insurance coverage can raise red flags with some companies. You may even find that this lapse in coverage, though voluntary and intentional, can result in higher premiums when you begin driving again.

Should You Reduce Coverage Temporarily?

Rather than canceling your auto insurance policy, you could instead choose to temporarily reduce your coverage limits. This option allows you to keep your policy active and in good standing, while also saving you money on that coverage during the time you’re not driving much.

Depending on how frequently you are getting behind the wheel, how much money you want to save, and your comfort level, there are a few approaches you can take here. You could:

  • Shift your policy to state-minimum liability coverage only
  • Raise your deductible 
  • Lower your comprehensive coverage limits
  • Eliminate extra features on your policy, such as accident forgiveness and roadside assistance

What to Keep in Mind

If you’re going to reduce your auto insurance coverage, there are a few things you’ll want to remember.

State-minimum liability coverage is important. Your vehicle’s registration may be tied to it, so lapses in coverage — even if voluntary — can result in penalties.

Driving isn’t the only risk to your car. Comprehensive coverage is still valuable if your car will be parked anywhere but in a secure garage. If your vehicle gets sideswiped in the middle of the night or a tree falls on the roof, you may regret going liability-only.

Remember to bump your coverage back up when you start driving again. As soon as you return to work or begin driving around town more often, you should move your coverage limits back. The last thing you want is to get into an accident and have limited coverage or a high deductible that you didn’t plan for.

How Auto Insurance Companies are Helping

Aside from the coverage changes you could make on your own, you can also expect that your insurer will try to make this situation easier. According to the Consumer Federation of America, the vast majority of auto insurers are doing their part to help Americans during this pandemic, in a number of different ways. 

Coronavirus Refunds and Credits

In most cases, this translates to a refund or credit that’s being offered to drivers, calculated as a portion of their premiums paid. 

Of course, some insurance companies are doing a better job than others. Here’s a look at some of the rebates and credits that have been announced thus far, and what you can expect to receive as a driver with one of these companies. 

  • Progressive customers will be receiving a 20% credit, which will be automatically added to their accounts for April and May premiums.
  • State Farm drivers can expect a dividend credit that equals about 25% of their premiums.
  • As customers of Allstate, drivers will receive a rebate equal to 15% of their April and May premiums. 
  • Travelers Insurance is providing drivers with a 15% credit on their April and May auto policy premiums.
  • Nationwide has announced that drivers will receive a $50 one-time premium refund per active policy.
  • Drivers with USAA can expect to receive a credit of 20% on two months’ worth of premiums.
  • GEICO is giving auto, motorcycle, and RV insurance customers a 15% credit on their 6- or 12-month premiums. This credit will be applied to their next policy renewal.
  • You’ll get a refund of 20% on two months’ worth of premiums for being a driver with SafeCo, which will be sent by check or credited back to your most recent form of payment.
  • American Family Insurance is offering a one-time credit of $50 per vehicle to its auto insurance customers.

These are not the only insurance companies offering COVID-19 refunds and credits, of course, so be sure to check what you’re eligible for if you are insured elsewhere. It seems that the typical driver can expect somewhere between 15-25% back.

And of course, it’s important to note that each company has their own rules in place for these refunds. Some may limit credits to those drivers who already had active policies when the shelter-in-place orders first began, for instance.

Payment Extensions and Grace Periods

Some insurance companies are allowing drivers to adjust their payment due dates, or simply extending them for everyone. If you are waiting on unemployment benefits to kick in or just want a little extra time to make your monthly payment, you’ll most likely have that option. 

Most auto insurance companies are also pausing policy cancellations due to non-payment, through at least May 31, 2020. If you are having trouble making your payments on time, give your insurance company a call to discuss your options, and try to pay whatever you can toward your bill. But either way, you can expect that your coverage will not be canceled, at least through the end of May.

If you’re a Gabi customer, your licensed Gabi insurance agent can also be a great resource to help with your individual situation. Email advisors@gabi.com anytime to speak with an agent about your options.

This May Be a Great Time to Shop Around, Too

You’re home anyway, aren’t driving, and may even have some extra time on your hands… use this opportunity to shop around for coverage and see if you could be saving on your auto insurance all year-round.

At least once a year, it’s smart to compare auto policies, even if you’re happy with your insurer. You may find that another company could offer you better features and coverage, and maybe even at a more competitive price. 

By shopping through a fee-free platform like Gabi, you’re able to compare quotes from up to 40 insurance companies at once. In a matter of minutes, you can search for your exact policy through multiple providers, ensuring that you’re always paying the best price for your coverage. 

None of us knows how long it’ll be before life returns to “normal.” In the meantime, though, there are plenty of ways that you can trim expenses on things like your auto insurance policy… without sacrificing safety or security.

Editorial content on Gabi.com is not written by a licensed insurance agent. It is intended for informational purposes only and should not be considered legal or financial advice.

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